2 rulings may alter PACA actions

(Aug. 25) NEW YORK — Recent rulings by two U.S. district judges in New York could force changes on who may or may not bring action against debtors under the Perishable Agricultural Commodities Act.

In a case involving two Bronx-based companies, East Side Produce, a brokerage that filed suit against R Best Produce Inc., Judge Shira Scheindlin of the Southern District of New York, ruled that brokers are covered under PACA and may bring actions, said Paul Gentile, a New York-based PACA attorney.

“East Side said to R Best, ‘We did certain deals, and we’re suing you under PACA for our fees,’” Gentile said. “The PACA is meant to deal with shippers and receivers. But the judge researched it and under first impression — the issue had never been decided before — ruled that brokers are, in fact, covered.”

BIG IMPACT

Gentile said the decision would have far-reaching impact.

“The brokers will want to know this throughout the country,” he said.

“It sounds like the judge realized that a broker is part of the chain of sale made from the origin of the product, so he’s entitled to the rights that are going to be passed along monetarily to the origin packer or grower,” said Dave Haun, owner of Haun Potato Co., a Merriam, Kan.-based brokerage.

LANDLORDS TAKE A BACKSEAT

In another case in the same court, Judge Kimba Wood ruled in late July that creditors bringing action against a bankrupt receiver, now-defunct Jacobson Produce Inc., of New York, take precedence over a landlord — the Hunts Point Terminal Market — seeking compensation.

“The judge said that the suppliers should be paid before the market gets a dime,” Gentile said.

Jacobson Produce was one of 13 Hunts Point firms implicated in the 1999 Operation Forbidden Fruit sting. Its assets were initially frozen in April 2000.